Maximizing Graduation Money
Graduating high school students often receive gifts of money. Here’s how your student can maximize generous gifts from family and friends.
Why It Matters
- Your student can save earnings and other funds for later.
Depending on how much your student received, using graduation money to pay for certain expenses now allows other college savings to continue earning interest for later use. - Your student might be able to reduce loans.
If your student received a large amount in gifts, he or she might be able to hold off on taking out some planned student loans for another semester or year. If your student will defer paying interest on loans until after graduation, this will save some interest that would have accumulated over the course of the first semester or year. - A break can be beneficial.
If your student works to earn money for college, a stash of cash may mean fewer working hours for one or more weeks, allowing your student some time to mentally refresh before the transition to college.
What Your Student Can Do Now
- Save the money.
Instead of rushing out to upgrade a phone or buy tickets to an upcoming concert with the cash, your student can set aside the money received as gifts for college expenses, such as buying or renting books. - Make a rational plan for the income.
Depending on the total amount of money received, your student should consider how best to use the money to maximize it for college expenses. Will using it to buy a bicycle or scooter now mean future savings on car expenses throughout college? Maybe the money is enough to use for a month of rent off-campus, reducing on-campus housing expenses next year. - Enjoy spending a small portion.
Your student may wish to designate a small percentage of the graduation money for fun purchases now. This can help keep your student motivated to stick to a budgeting plan for the next four — or more — years.
What Your Student Can Do Later
- Stick to the plan.
If your student designated the gift money as future rent money, for example, it shouldn’t be used to fund a spring break beach trip. Your student will have many temptations to spend money; it’s important to reduce expenses and use available money wisely to minimize the amount of student loan debt by graduation. - Add to the nest egg.
Having a certain amount in savings can motivate your student to add to it. Perhaps he or she would enjoy the challenge of not only continuing to save the money for future expenses but adding to it with extra earnings and scholarship awards.
What You Can Do
- Help weigh pros and cons.
You can help your student decide whether to spend the money on school expenses right away or save it for specific uses in the future. Consider whether any smaller purchases now might pay off by saving even more in the future. - Put it in perspective.
Your student may be tempted to spend the money now, especially if it doesn’t seem like a large enough amount to offset high costs of tuition and housing. Help your student calculate actual college expenses that could be paid with the gift money. Review our list of ideas to get started.
Next Steps
Be sure to complete the survey questions at the end of this article to be entered into the 529 deposit giveaway!
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